INDIANAPOLIS & SAN FRANCISCO—In the hopes of advancing a new option for
treating several autoimmune and chronic inflammatory conditions, Eli Lilly and Co. and Nektar Therapeutics have inked a strategic collaboration for the co-development of NKTR-358, a novel
immunological therapy and potential first-in-class resolution therapeutic.

Per the terms of the agreement, Lilly
will pay Nektar $150 million in an initial payment, with the potential for up to $250 million in additional development and regulatory milestones. Nektar
will assume responsibility for completing Phase 1 clinical development while the partners split Phase 2 development costs, with Lilly fielding 75 percent and
Nektar 25 percent. Nektar will have the option to participate in Phase 3 development of the compound on an indication-by-indication basis, and also stands to
receive double-digit royalties commensurate with their Phase 3 involvement as well as product sales. Lilly will handle global commercialization costs, and
Nektar will have the option to co-promote the product in the United States under certain conditions. The deal is subject to clearance under the Hart-Scott-
Rodino Act and other customary closing conditions.

"We are very pleased to enter into this collaboration with
Lilly as they have strong expertise in immunology and a successful track record in bringing novel therapies to market," Howard W. Robin, president and
CEO of Nektar, said in a press release. "Importantly, this agreement enables the broad development of NKTR-358 in multiple autoimmune conditions in
order to achieve its full potential as a first-in-class resolution therapeutic."

It's thought that NKTR-
358 could address one of the base immune system imbalances at the root of many autoimmune conditions as it targets the interleukin (IL-2) receptor complex to
stimulate proliferation of regulatory T cells. This activation could rebalance the immune system and provide clinical impact and improved organ function.
NKTR-358 achieved its first human dose in Phase 1 clinical development this March. The drug candidate is being developed as a once- or twice-monthly self-
administered injection for a variety of autoimmune disorders, and at present is being evaluated in a Phase 1 dose-finding trial to establish a range of dose
levels that could be advanced in additional clinical trials. The study will assess pharmacokinetics, safety and observed changes and functional activity of
regulatory T cells in roughly 50 healthy subjects.

"We look forward to working with Nektar to study this
novel approach to treating a number of autoimmune conditions," said Dr. Thomas F. Bumol, senior vice president of Biotechnology and Immunology Research
at Lilly. "NKTR-358 is an exciting addition to our immunology portfolio and reinforces Lilly's commitment to sustain a flow of innovative medicines
in our pipeline."

News of the deal came two weeks after Nektar announced positive preclinical results for
NKTR-358 that demonstrated that treatment with the compound “induces profound regulatory T cell effects and suppresses inflammation in multiple
preclinical models,” as noted in a press release. The results were shared at the 13th Annual World Congress on Inflammation earlier this
month.

"These studies show that NKTR-358 increases the suppressive capacity and prolongs activation and
proliferation of regulatory T cells with limited effects on conventional T cells in order to address the imbalance found in many autoimmune diseases,"
Dr. Jonathan Zalevsky, senior vice president, Biology and Preclinical Development at Nektar, said in a press release at the time. "NKTR-358 also
demonstrated suppression of antigen-driven inflammation in multiple preclinical models including systemic lupus erythematosus. We are very excited about
NKTR-358's potential as a resolution therapy in autoimmune disease."